What Must Happen to Asset Turnover to Leave ROE Unchanged

Multiple Choice

What must happen to asset turnover to leave ROE unchanged from its original 16 percent level if the profit margin is reduced from 8 percent to 6 percent and the leverage ratio increases from 1.2 to 1.6? Asset turnover must:

A) Remain constant
B) Increase from 1.46 to 2.33
C) Decrease from 14.58 to 2.33
D) Increase from 4.76 to 9.60 Old ROE: .16 = .08 x Asset turnover x 1.2
\1) 667 = Asset turnover
New ROE: .16 = .06 x Asset turnover x 1.6